Mods Vs Lockers: Region Coding And The Legal Dilemma

The price and release date of the Nintendo 3DS has been unveiled, and while plenty were surprised by the $349.95 price point, some would still prefer to import at the lower US price, but for one issue – region locking. We decided to take a deeper look into the legalities of region locking – and where the Australian law stands on the issue.

It’s 2011 and playgrounds across Australia are swarming with children, huddling around their DSes – versing one another at Mario Kart and trading Pokémon. It’s a sight that would suggest that the Nintendo DS, as the highest-selling console of all time, is one of the major drivers of software sales in this country.

But it’s not – far from it.

Dwindling numbers have driven most third parties to abandon the Nintendo DS – in droves. Not because there isn’t an incredibly large user base, not because gamers have discarded their DS in anticipation of the impending 3DS juggernaut – no, the problem is piracy and, more specifically, the use of R4 cards.

Circumventing the security of the DS – allowing users to store large amounts of games – the R4 cards has become an accessory to ludicrous amounts of piracy. Tragically, Australians are one of the biggest offenders, for two major reasons – firstly, we traditionally pay more for games, and, secondly, a court ruling in 2006 rendered the legalities of owning a circumvention device such as the R4 card a genuine legal grey area, helping spread the misconception that mod chips and R4 cards are legal in Australia.

Post the announcement of the Nintendo 3DS, however, most of the discussion around circumvention devices revolves around one important issue – region locking, and the consequences of companies such as Nintendo utilising region locks in order to control the influx of imports; an influx that has become an increasing problem for retailers and distributors in this country.

OBJECTION!
Even today confusion reigns over this issue, and rightly so – it is a confusing issue. But perhaps the most important point is the fact that piracy, in all shapes and forms, has always been illegal – it’s merely the devices themselves that were within the bounds of Australian copyright law. Circumvention devices existed in order to override a company’s ability to manipulate specific markets through region locking – the fact they were also used by software pirates was deemed irrelevant by the courts.

“The mod chip was judged as not being an illegal circumvention device in 2006,” claims Melchor Raval. “Kirby J of the High Court ruled that the mod chip did not at all facilitate reproduction because, in fact, reproduction already occurred before the use of the mod chip.”

Melchor Raval is a PhD student, a researcher at Monash University currently writing a dissertation on this complicated subject – it’s an area of law that has evolved considerably over the years. Initial rulings, such as the one referenced above, tended to fall on the side of the consumer – as mod chips were deemed a necessary tool for those looking to override region locks placed by distributors.

That was especially relevant with regards to the PS2 Mod Chip case.

“Any deterrent attempt such as regional coding was considered irrelevant,” claims Melchor, “because according to Kirby J, one of the purposes of Sony’s regional access codes was non-copyright related, namely to enforce ‘global market price differentiation’.”
Essentially the ruling was enforced to protect consumers and promote fair-trade. Region locked consoles, according to Kirby J, existed solely to gain unfair “market advantage”, and, as a result, circumventing that mechanism was deemed fair – regardless of whether or not that circumvention made it easier to access pirated content.

But that was then – and this is now. Australia is a country bound by issues of delayed releases, and overpriced of goods and services. The US, however, is not, and has little need to circumvent any kind of device as a result of region locking. So when the Australian Government decided to enter into the Australia-United States Free Trade Agreement (AUSTFA) in an attempt to ensure greater access to the US market for Australian products, one of the conditions was that Australia tighten the reigns when it came to the definitions of what was ‘legal’ and ‘illegal’ when circumventing aspects of hardware.

OVERRULED!
“The whole thing is basically about the protection of copyright,” claims David Brennan, a Professor at Melbourne University specialising in copyright law, “and that can be with regards to a product, component, or software.

“When Australia entered into the Free Trade Agreement with the United States, the US weren’t too happy about the earlier ruling and they wanted to tighten up protections against access to these kinds of things.”

As a result, Australia’s policy was to treat R4 cards, mod chips, or any other means of circumvention in an similar way to the US. The changes to the law were minor – but significant enough to remove the need to prove that circumvention devices encouraged piracy. Now all Sony or Nintendo need do is prove that that the device in question – be it software, mod chip, or R4 Card – interferes with any Technological Protection Measure (TPM) put in place on the console to protect copyright.

“This may not sound too exciting,” states Melchor, “but Nintendo now only has to prove that the device circumvents the access control TPM of the DS to prove that the R4 card is an illegal circumvention device. This is in contrast with the Sony case, where Sony had to argue that the device facilitated illegal piracy. This burden of proof is not as important as it was because of the amendments.”

Yet, interestingly enough, as a result of the last Nintendo case being settled out of court, there is still no real legal precedent to this.

“Nintendo has been quite successful in arguing that the sale, manufacture, and marketing of the R4 cards are illegal because it has no other purpose other than to enable or facilitate the circumvention of the DS’s TPM,” continues Melchor. “However, the case was settled out of court, hence it does not create a precedent.”

But would you really be willing to challenge Nintendo on this? We wouldn’t recommend taking the chance.

TAKE THAT!
But how does this effect region locking and, more specifically, the 3DS? Again, it’s a complicated, multi-faceted issue. When Nintendo first announced that the 3DS would be region locked, the initial outcry centred on the presumption that region locking the device would result in more piracy – but that’s probably not the case. After all – piracy was rampant on the DS, which was initially a region free device.

By region locking the 3DS, however, Nintendo are playing things close to the bone. Hypothetically speaking, if someone was to create a device that managed override Nintendo’s region lock, without subverting the 3DS’s Technology Protection Measures, that device would technically be legal.

“There are some exceptions to the rule,” begins Brennan. “If a Technological Protection Measure exists purely to stop people from playing games imported from another country, it’s legal to circumvent that – provided that same technology does not allow you to play pirated game.”

Melchor agrees and expands upon the point.

“One could argue for the interoperability exception. This exception basically allows users to circumvent technological measures to install independent programs, like homebrew, to devices without the authorisation of the owner.”

Chances of success using that argument, however, are limited.

“There are problems with this,” Melchor concedes, “because from what we’ve seen in international cases regarding mod chips, courts are more willing to see that the proportion of gamers who use the mod chip only use it for piracy and not for homebrew or creating interoperable applications for gaming consoles.”

Simply put – the widespread nature of piracy makes it difficult for courts to accept that circumvention devices can be used for anything but the illegal distribution of content. Tragically, they’re probably correct in that assumption.

But regardless of semantics, the question remains – why region lock the 3DS? Considering the fact that it opens up the circumvention debate to minor loopholes, wouldn’t it be safer for Nintendo to simply go region free? The law is, after all, set up to protect Nintendo from piracy.

Nintendo’s official response is predictably vanilla: “Nintendo has developed different versions of Nintendo 3DS hardware to take into account different languages, age rating requirements and parental control functionality as well as to ensure compliance with local laws in each region. Nintendo 3DS also offers network services specifically tailored for each region.”

While we’re sure that there is truth in that statement, region locking has always been about maximising revenue in specific territories, and this has become increasingly important in recent years given the rapid explosion of the handheld import market. It’s difficult to charge a premium for games sold in Australia when they can be easily imported from other regions.

But this is precisely why mod chips were made legal to begin with. Previous precedent states that protection measures set up solely to maintain “market advantage” are not protected under copyright law – yet we still exist in a legal grey area where it is not illegal for companies to create region locks.

And this is where Nintendo has been clever – you can legally disable region locking on a console, if you can find a way to disable it without affecting any of the other Technical Protection Measures. The only problem is, with the way modern console firmware is set up, this is practically impossible.

“If the regional access codes are intertwined with the access control measures,” explains Melchor, “and each function cannot be circumvented independently, then the access control measures, along with the regional codes, would be considered only one access control TPM.

“Nintendo will likely program and develop their TPM this way to escape the regional coding loophole.”

Consumers, it seems, are locked into some bizarre legal paradox.

HOLD IT!
But, on a pragmatic level, if we want to play games from other regions on our 3DS, what can we really do? It remains extremely unlikely that a legal method of circumventing region locks will be created. So what next?

Our only realistic option, according to both David Brennan and Melchor Raval, is to make region locking a trade practices issue, and take that complaint to the Australian Competition and Consumer Commission (ACCC).

“It is honestly possible for consumers to complain to the ACCC about this,” claims Melchor. “The ACCC has been against regional coding since the beginning, even arguing against Sony in the Sony v Stevens case.”

David Brennan concurs. “The policy of the ACCC has been to open up the market for legal imports – in fact, the previous leadership had a real interest in this stuff.”

Sadly, nowadays, the ACCC has taken a far less prominent role in this debate.

The ACCC has been silent about regional coding for quite some time now,” states Melchor, “probably because this issue isn’t in the top list of priorities right now.”

Until the ACCC takes notice, it’s very unlikely that this situation will change in the near future.

“Despite the fact that regional coding isn’t protected by copyright anymore,” reflects Melchor, “corporations are simply unwilling to change standards to reflect this – they still persist in using NTSC and PAL formats even though they’re now completely obsolete. Until a court or the ACCC creates a motion stating that forcing consumers to buy games in one region alone is unlawful, it doesn’t give companies like Nintendo much motivation to change.”

Once again, it seems, consumers must bear the brunt – and the cost – of indifference.